The big business of battling wildfires

June 22, 2011: 12:04 PM ET

Government agencies are relying more on private contractors to fight the nation's wildfires, but the business of disaster response can be just as unpredictable as the blazes themselves.

By David Tao, contributor

Arizona Wallow fire

Arizona burns.

FORTUNE -- As the Wallow fire continues to rage in Arizona, federal, state, and municipal entities are working around the clock to contain it. But there's another group of increasingly important firefighters battling the blaze: private contractors.

While governmental agencies are responsible for coordinating wildfire management efforts, the physical operations of containment are increasingly the domain of private business. And as global warming contributes to hotter temperatures and dryer conditions fueling more intense fire seasons, for-profit companies are taking on bigger roles where increasingly cash-strapped government bodies come up short.

Yet the unpredictability of yearly fire seasons, combined with the uncertainty of public finances, raises questions about contractors' ability to address such emergencies.

Private industry makes up over 40% of wildfire services across the country, a number in line with Forest Service expenditures, according to Debby Miley, executive director of the National Wildfire Suppression Association, which represents contractors. In 2008, the Forest Service spent $757 million on more than 1,000 private contracts, roughly 52% of its $1.46 billion budget for wildfire suppression. In 2009 and 2010 -- two slow fire seasons when expenditures dropped by half -- that fraction fell to 41%.

Despite what's likely a temporary dip, private contractors have over the past two decades become big players in most aspects of wildfire management. A few have emerged that can respond to fires across a broad swath of the U.S. -- Chubb's Wildfire Defense Systems currently operates in 14 states, and Rural Metro's (RURL) fire operations span the country. But the industry is still largely comprised of small contractors, many with just a handful of employees and one or two pieces of heavy equipment. Miley estimates around 75% of contracting wildfire companies fit in this latter category.

While wildfire aviation has been largely private since its inception (government agencies can't afford to pay for planes that would sit idle during the winter), the use of contracting ground crews is a relatively new development. The first non-aviation contracts were signed in 1986, and by the time much of Yellowstone went up in smoke in 1988, the practice was flourishing. Federal and state entities have since relied on private companies to clear brush, light backfires, and fulfill an increasingly diverse array of support roles.

"Twenty years ago, fire camps looked much different -- it was just some government employees sleeping in tents between shifts," says Bureau of Land Management spokesperson Ken Frederick. "Today there's data processing, food services, showers, potable water services, transportation. The private contractors' roles have ballooned."

Regulatory oversight

Unlike government bodies, private contractors can hire their work crews for jobs in landscaping or construction during the fire offseason. The downside to this flexibility, at least for crews on the front lines, is that higher rates of turnover can make it difficult for private employees to accumulate the necessary firefighting experience. And while contracted firefighters are expected to go through training outlined by the National Wildfire Coordinating Group (NWCG), the ability to enforce such standards is hotly contested.

In a 2006 audit of the Forest Service's firefighting contracts, the USDA expressed concerns that some private employees received inadequate training prior to work. Groups representing contractors have responded by upping their use of third-party monitors on company training facilities, though companies are still allowed to certify their own employees.

Some contract firefighters have prior experience working for government agencies. But the risk of private certification is that companies responding to a sudden wildfire outbreak might be tempted to speed new employees through training in order to capitalize on the spike in labor needs.

Another worry is that high industry turnover and competition for contracts increases the risk of cutting corners and burdens the government with a constant stream of new partnerships, often formed during a state of emergency.

Wallow is the largest wildfire in Arizona history and, along with Monument and Horseshoe II, one of three state fires making 2011 one of the busiest seasons in recent memory…but only for the Southwest, where new companies are vying to get involved. In contrast, the Pacific Northwest is normally a literal hotbed of fire activity, and according to Miley, a slow season has led many contractors in that region to close down operations; the industry's many small operations are especially at risk.

"The trick in this industry is that you've got to be a very astute businessman," she says, noting the impossibility of pinpointing where and when the next big fire will strike. "There are no work guarantees."

But for all the risks associated with contracting wildfire management -- both to taxpayer dollars and the private contractors themselves -- companies are continuing to find new, profitable niches in the business of disaster. The NWCG, responsible for coordinating wildfire response between government agencies, is considering a plan to contract out even more work. Though still in the proposal stage, the plan would give private companies an unprecedented level of control over wildfire response, from the workers on the ground up to the committees organizing those workers. In effect, the program would contract out the act of coordinating both government agencies and private contractors, which could increase opportunities for conflicts of interest.

For now, the Arizona wildfires continue to rage as the nation remains unsure where the next one will strike -- or who will protect us when it does.

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